Key Developments:
* Tariff Reduction Agreement: The United States and China have agreed to significantly reduce tariffs on each other's imports over a period of 90 days. This follows high-level talks in Geneva, where both sides achieved "substantial progress."
* New Tariff Levels: The United States will reduce tariffs on Chinese products from 145% to 30%, while China will decrease its tariffs on U.S. products from 125% to 10%. A base tariff of 10% will remain for both countries during this period.
* Tariff on Fentanyl: It is important to highlight that the additional 20% tariff from the United States related to concerns about fentanyl remains separate from this agreement, raising the total tariff from the United States on Chinese products to 30%.
* Suspension of Countermeasures: China will also suspend its tariff and non-tariff countermeasures during these 90 days.
* Positive Market Reaction: News of this de-escalation has generally been met with positive reactions in the markets. For example:
* Stocks rose.
* Tech stocks recovered.
* Gold prices fell as demand for safe-haven assets decreased.
* Soybean and livestock markets in the United States experienced gains.
* Dow Jones futures rose, and S&P 500 and Nasdaq Composite futures also increased.
* Reasons for De-escalation: While the exact reasons are still developing, reports suggest a mutual interest in balanced trade and a desire to alleviate the economic pressures caused by the prolonged trade war. The U.S. Treasury Secretary also noted China's commitment to addressing the fentanyl crisis as a positive surprise.
* Possible Impacts:
* Reduction of Inflation: The reduction of tariffs could lead to a decrease in import costs, which could curb the
